China’s GDP falls below 7% for first time in six years

China’s economic growth slipped below 7% for the first time since the global financial crisis the National Bureau of Statistics reported Monday coming in below the 7% seen in the first half of the year, but beating analysts’ expectation of 6.8% growth.
The number increases pressure on the People’s Bank of China to cut interest rates to boot business investments.

The slight decline in the face of expectations for a big economic drop off, is giving more credence to those predicting a gradual slide in gross domestic product

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“Underlying conditions are subdued but stable,” Julian Evans-Pritchard, an analyst at Capital Economics in Singapore told Reuters “Stronger fiscal spending and more rapid credit growth will limit the downside risks to growth over the coming quarters.”

Some analysts were hopeful that the third-quarter cool down could mark the low point for 2015 as a burst of stimulus measures rolled out by Beijing comes into force in coming months, but muted monthly data for September kept such optimism in check, reported Reuters

“As growth slows and risk of deflation heightens, we reiterate that China needs to cut reserve requirement ratio (RRR) by another 50 basis points in the fourth quarter,” economists at ANZ Bank said in a note to clients, reported Reuters. “Looming deflation risk suggests that the People’s Bank of China will also adjust the benchmark interest rates, especially lending rate, down further.”

President Xi Jinping told Reuters in an interview over the weekend that the government has concerns about the economy and was working hard to address them.

Policymakers think they can stem a rapid rundown of the country’s foreign exchange reserves and ease pressure on the currency by pump-priming the economy to meet this year’s growth target of about 7%, sources involved in policy discussions told Reuters.

Economists expect the central bank to cut interest rates by another 25 basis points (bps) and lower the amount banks must hold as reserves by 50 bps by year-end, according to the latest quarterly poll by Reuters. The same poll predicted fourth-quarter economic growth of 6.8% dropping to 6.7% in the first quarter of 2014.